Foreclosures are giving homebuilders a run for their money when it comes to pricing, but builders still maintain a marketing edge by promising affordable, new homes equipped with the latest technology.
In other words, in a marketplace filled with foreclosures competing for buyers attention, builders are saying ‘new is still better’ and using that philosophy as a marketing strategy.
“Builders have always segmented themselves from existing homes,” says David Crowe, chief economist for the National Association of Homebuilders. “But because foreclosures are now big competition and cheap competition, they (builders) are ramping up that distinguishing factor.”
And in a market where every home — whether new or old is marked down and accessible via low-interest-rate financing — new homes have several amenities that builders are promoting. Those include new appliances and heating and cooling systems, as well as the latest technology to make residences energy efficient, said Crowe.
“It’s affordable because the builder is competing and reducing their prices to the lowest possible level,” he said. Crowe says in this slow retail environment even subcontractors are cutting prices, making it easier for homebuilders to offer cheaper prices to buyers who are comparing new homes to foreclosures.
The only foreclosures that can compete at this level are fairly new homes that went into foreclosure, Crowe said.
“The newer foreclosures would at least be in the same market because of their freshness and because of their technology and location,” he said.
To compete, builders also are agreeing to cover some of the closing costs and financing for new homebuyers.